Authors

Document Type

Article

Publication Date

2014

Abstract

In Section I, we summarize and analyze the Dodd-Frank laws that were enacted to regulate home loan terms and the key changes made to the home loan disclosure rules and forms, critiquing in particular the changes made to the APR component of the new CFPB disclosure form. In Section II, we detail and report on the methods and results from two APR Experiments we conducted (one using eyetracking technology to see which areas of the disclosure form participants were looking at and for how long); we also report on the low level of financial literacy of the participants reflected in the results of the financial literacy test we gave them. In Section III, we consider how adding certain interactive features to the Loan Estimate can address financial literacy deficiencies and help overcome certain common deceptive practices that currently impede the effectiveness of home-loan disclosure forms. We consider which sections of the Loan Estimate form could benefit most from enhanced interactive features, including the enhanced APR disclosure that we recommend, and what those interactive features might look like. We also recommend certain other revisions to the Loan Estimate form for the CFPB to test to see if these changes will cause the form to be even more useful to consumers,